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Council Tax Precepts and Procedures

Council Tax Precepts and Procedures. Parish and Town Council Workshop – 6 th September 2013. Subjects we are looking at : - How a parish/town council’s council tax charge is calculated. Local Council Tax Support and the problems it caused in 2013/14. Proposals for 2014/15 and beyond.

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Council Tax Precepts and Procedures

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  1. Council Tax Precepts and Procedures

  2. Parish and Town Council Workshop – 6th September 2013 • Subjectswearelookingat: - • How a parish/town council’s council tax charge is calculated. • Local Council Tax Support and the problems it caused in 2013/14. • Proposals for 2014/15 and beyond.

  3. Calculating Parish/Town Councils’ Council Taxes • The basic formula to calculate a parish/town council’s council tax charge is: - Parish Council band D council tax charge equals: Parish/Town Council’s Precept divided by: Parish/Town Council’s Taxbase • The precept is the amount of funding the parish/town council requests the principal council raise for it from council tax. • The taxbase is the number of band D equivalent properties that are liable for council tax in the parish. How this is calculated was changed by the Government in 2013-14.

  4. Therefore: - • Higher precept = higher council tax • Lower precept = lower council tax Conversely: • Higher taxbase = lower council tax • Lower taxbase = higher council tax

  5. Calculating a parish/town council’s taxbase • Leeds City Council must take a ‘snapshot’ of the number of properties in each parish (and the rest of the city), and in each council tax band, on 30th November. This is the starting point for calculating the taxbase for the following year. • A number of adjustments have to be made to these figures for: • Discounts and exemptions • Additions and demolitions • Council Tax Support discounts (introduced for 2013/14) • Technical changes to council tax (introduced for 2013/14) • Long-term empty properties premium (introduced for 2013/14) We shall look at each of these in turn.

  6. Discounts and exemptions • Discounts and exemptions reduce the liability of a property to council tax. • There are a number of statutory discounts and exemptions to council tax. • The most familiar is the 25% reduction for a person living alone in a property – the Single Person Discount. • So for every four properties in a band attracting a Single Person Discount, the number of properties in that band liable for council tax will be reduced by one.

  7. Additions and Demolitions • We estimate the number of new dwellings that will be completed by the 31st March. • We also estimate how many new houses will be completed during the new financial year. • These figures are arrived at net of any demolitions we are expecting. • The net additions are then added to the number of properties in each relevant band.

  8. Local Council Tax Support • In April 2013 Council Tax Benefit was replaced by Local Council Tax Support. • Council Tax Benefit was cash paid towards full liability. • Local Council Tax Support is a discount, reducing liability. • Therefore the LCTS new system reduces a taxbase, and in 2013/14 caused parish council tax charge to rise, even when the same precept was requested. • The funding for council tax support was reduced by 10% and decisions about how to find the savings given to councils. • More on this later…

  9. Technical changes to council tax • Also in April 2013, a number of other changes were introduced about council tax that effect the taxbase. • These were mainly about giving councils the power to decide whether to continue to offer certain discounts. • Most councils decide to withdraw selected discounts. For example Leeds City Council withdrew second homes and short-term empty properties discounts, to help fund council tax support. • These reforms tend to increase the taxbases of parish/town councils.

  10. Long-term empty property premium • Alongside the technical changes to council tax, the Government introduced, in April 2013, the power for councils to charge a premium on the council tax of properties empty for over two years of up to 50% • This means for every two long-term empty properties the taxbase of a parish could rise by 1 property. • The policy is meant to encourage owners to bring back their properties into use.

  11. Summary of the adjustments to property numbers in Anyparish

  12. Convert to band D equivalents: • Council tax is set as a band D council tax charge. • The council tax charge for each band of house is a given fraction of a band D charge. • Therefore the adjusted property numbers for each band need to be ‘converted’ into band D equivalents. The fractions are as follows, and the next slide shows the conversion of Anyparish’sadjusted property numbers into band D equivalents.

  13. The band D equivalents (taxbase) in Anyparish Anyparishtaxbase is 237

  14. The council tax charge • AnyparishParish Council have calculated that, after all other income and expenditure, they will need £5,000 to be raised by council tax. A precept of £5,000 is requested . • The billing authority for Anyparishcalculates the band D council tax charge: Band D council tax = £5,000 divided by 237 = £21.10 per band D property • For other bands, this charge is multiplied by the relevant factor. So: band A charge = £21.10 x 6/9 = £14.06 band E charge = £21.10 x 11/9 = £25.78 band H charge = £21.10 x 18/9 = £42.20, etc.

  15. The following year at Anyparish • Assume in the following year, more people claimed council tax support in Anyparish. • Because of this, the tax-base went down to 210 band D equivalent properties. • Parish councillors wanted advice on their precept. • 1) Keep the precept at £5,000 • But this means the council tax charge will go up to: - £5,000 divided by 210 equals £23.81, a rise of 13.1%

  16. The following year at Anyparish 2) How to keep the council tax frozen: - To do this the band D council tax from the previous year is multiplied by the new taxbase to give the new precept. The parish council still has to be sure this is enough to meet their commitments. £21.10 multiplied by 210 equals £4,431 – the new precept 3) Allow parish council tax to rise by 5%: - Add 5% to last year’s council tax and multiply by the new taxbase to give the new precept £21.10 x 105/100 = £22.15 then multiply by 210 equals £4,442 – the new precept

  17. Local Council Tax Support

  18. Local Council Tax Support (LCTS) • Two very big reforms to local government finance in April 2013. • Localisation of council tax support and, • Business rates retention – but this does not affect taxbase. • LCTS affects all councils, plus the police and fire authorities, because all rely on their taxbase to raise money from council tax. • The taxbase is reduced by giving claimants of support discounts, instead of cash against full liability. This means that local government is able to raise less funding from council tax.

  19. Compensating local government for reduced taxbase • The Government pays billing authorities, like Leeds City Council, and major preceptors a grant. This reduces the amount the authorities need to raise from council tax, to balance the loss of taxbase. • However, the Government also cut the amount of funding by 10% compared to 2012/13. • Billing authorities are given the power to decide how to fund the 10% cut in funding – make savings on/cut other services; raise council tax to fund the difference; or reduce support given to claimants from the level under the old benefit.

  20. Council tax support and parish/town councils • As has been seen, parish and town council taxbaseswere cut by LCTS as well. • No funding was given to them to balance this taxbase reduction by central government. • Government requested billing authorities to “work with” local preceptors to “manage” the effect on local councils’ taxbases. • Volatility – because parishes are relatively small changes in council tax support in parish can have a significant effect on taxbasesfrom year to year.

  21. Looking forward to 2014/15

  22. The constraints • The taxbase figures have to be based on properties as measured on 30thNovember. • Leeds’ Local Council Tax Support scheme was agreed for 2013/14 only. Scheme for 2014-15 is being developed and will be finalised in mid-December. • The taxbases for Leeds and all parishes have to be approved by Full Council before they become final (usually January). • Parishes have to issue their precepts before 1st March. • Leeds City Council has to set its budget by 11th March. • However for direct debits to be able to be set up for 1st April, precepts, council taxes, and therefore budgets have to be set by late February, at the latest.

  23. The proposals • New parish precept returns will be sent out with a recommendation that parishes don’t set precept until draft taxbase issued. • Taxbaserecommendations approved just before Christmas and e-mailed to parishes. • Alongside these recommendations will be sent the change in taxbase that has happened in the last year, and the effect that any precept changes will have on parish council taxes. • Final taxbase will be approved by Full Council in January and confirmed to parish clerks by e-mail. • Deadline for issuing parish precepts to be extended to 14thFebruary.

  24. Contacting Us • Throughout the 2014-15 process there will now only be one team responsible for advising on and paying parish and town council precepts. • Your points of contact will be: - Rob Colley Mike Woods Tel: 0113 395 0733 Tel: 0113 395 1373 email: robert.colley@leeds.gov.uk email: mike.woods@leeds.gov.uk

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